tv [untitled] July 15, 2011 11:30am-12:00pm EDT
well see british science. sometimes. markets why not. find out what's really happening to the global economy because a report on our. seven thirty pm here on a friday or scare you with on t.v. a quick rundown of the stories now over thirty countries including the u.s. officially recognize the libyan rebel council as the legitimate governing authority reiterating call took it out for you to give up power of recognition to allow washington to sponsor a libyan rebels with money from cathy's frozen assets. the u.k. phone hacking scandal gathers pace forcing the chief executive of the group owned
by the muddled empire to quit meanwhile questions arise as to why it's taken so long to confront the crisis despite knowing about many of the allegations for years . people take to the streets to protest against a looming cuts in italy the latest e.u. country to be hit by the financial crisis as the parliament is set to approve a key austerity budget in an attempt to avert a bit. of the headlines here and not see my colleague bill dollars here in half an hour's time with more on the eurozone debt drain next it's people of elena's guests on cross talk talking about whether or not the e.u. has enough financial firepower to save it from. can. a low end welcome to cross talk on peter lavelle
a currency in crisis european finance ministers central bankers and politicians remain at odds on how to rescue the euro as pressure mounts for another priest bailout and investors worry about italy is the hero of dysfunctional currency and who will ultimately foot the bill. can still see. the eurozone crisis i'm joined by dennis gartman in virginia he is editor of the carbon letter in singapore we go to jim rogers he's an author and financial commentator and in washington we go to sherry's i'd raymond she is professor of international business finance and international affairs at the george washington university all right folks this is crossfire going to as you can jump in anytime you want there are different points of view here live here beneath the denisof i go to you first i am i asked the question before we go to you the facts of that are at hand with the euro i pose the question is it a dysfunctional currency what do you think about that. i've i've always thought it
was a dysfunctional currency i thought quite honestly that the only reason the only rationale for the euro to begin with was was to do something on the part of the northern european countries to tie the great german giants down with as many bureaucratic ropes as they possibly could they have done it to this point i think it is an eminently unsuccessful attempt i cannot imagine that that germans working as hard as they do as many hours as they do saving as much money as they do find anything in equal nature with the greeks who simply don't work as hard as they do don't save as much as they do and avoid taxes like they do so quite honestly i think at the core at the edges of this cloth the threat is being ripped in that cloth is finally coming apart jim singapore. is going to go to you anyway go ahead peter. peter it is that concept of a unified european currency is fabulous and the world needs something to replace or to compete with the u.s.
dollar unfortunately execution has not been very good they brought in people like greece and and portugal and ireland who weren't paying there aren't paying their bills and weren't paying their bills and that's led to the problem i'm like dennis i cannot conceive of why honest hard working our strength and dutch and fans should have to pay for a bunch of greeks are sitting on the beach drinking too so i and greek banks up and this is outrageous because shares and if i go to you in washington ok we have two euro skeptics or you to bounce and i don't little bit. i'll try to be much more in line is this this this this is a good project to begin with if the membership had been correct greece portugal ireland spain were never supposed to join and if it was a reasonable six countries that it down we would have had a pretty successful project but in the you know they've got some in the eurozone at this point this is not healthy and i agree with them that this situation is now but it's done it's legalized and no one can step out and no other people can you know
sort of change the rules at this point so the germans have to pay the piper they really need this document and this is the repercussions or they know already. they were ready to do it and that you're going. to see the power of the german the germans don't the germans don't have to pay the piper and lead to greece gold bankruptcy would be good for greece it would be good for the europe it'd be good for the world if greece went bankrupt and run out of the heart of pay their bills or stop lie then you would have everybody would know it's a strong sound currency based on a strong sound economy why not let him go bankrupt let's listen in our euro in america we've had. to be hence it is still great growth we've had carries no great growth it didn't in the united states and it didn't in the u.s. now ok sure so when you say. i'll tell you why because of the four hundred billion dollars of debt that greece has fifty percent is held by german and french banks
and those countries don't want to take a second hit in the financial markets it's that simple. why should why should taxpayers bail out banks since when do taxpayers have to bail out mistakes made by banks that taxpayers didn't make those mistakes when i make a mistake i can i come to you and let you bail me out next time i start losing money all right. well you should be doing u.s. government. well i absolutely agree with jim on this in this instance why can't they allow them to go to go bankrupt we in virginia understand our rights as virginians compared to anybody else i think that you have the right if you are a country to opt out of that circumstance i think the germans have absolute the right to say we have given up we have watched this for a decade it has proven to be unworthy we are simply stopping a payment to the greeks we're going to stop payment to portugal they have to get
their own act in order let them go greece will be far better off allow them to go back to the drachma make their economy stronger again let taurus move that go back to greece again we were talking about this beforehand it's too expensive to go and nobody is there greek is a tourist spot and no tourists are there let them become a choice by going back to a devalued drugs might tell you look a serious idea i think you brought up a very interesting point i think we have to go with it still here is that if you just press it in the same with greece then you have this is a knock on effect of this contagion and it is about banks here i mean we can all we can all criticize the banks but i mean the banking system in germany in france wants to survive this is well i mean it's damned if you do damned if you don't that's the problem after they were greatly cheers even those are states where you're going to go bankrupt shares i'm going to have. the problem is that if you let them go bankrupt and if they default and this contingent spreads inspired me going to skip over spain and heart right into italy where we're still grappling
with it today then you've got a real problem this is not a domino effect in the eurozone this is a break for the rest of the world that's been thrown and his death and going to affect our markets look the europeans can make up their minds hang on the europeans can make up their minds over a two day conference we took eleven trillion dollars in the global capital markets for that and don't think we will get him here if he gets it and it's too big to fail at this point and use ensures arizona. you make something go into hundreds of years one of the time jeremy pointed us share it makes it in going bankrupt four hundred shares our banks have been going bankrupt hundreds of years we have made horrible mistakes over the past thirty or forty years in the united states we have made unbelievable mistakes in our financial situation so we've got to pay the piper a visionary as dennis says when do you stop you're going to run this down for another five years of the actually the market's going to say you know they're you
going to have a major crisis that you have to deal with at least if you have a crisis now you can organize it and let some people go bankrupt and by the way there is i wouldn't pull out of europe i would greece i'd just go bankrupt and reorganize i think the euro is good for greece you know if they reorganize the stop the craziness ok cher is like if i can ask you. if you want to go ahead jurors are going. well i just wanted to say you know clearly i think i agree. with jim that clearly greece is future is within the eurozone but i like to ask jim and dennis both one other thing as americans if the u.s. government had not stepped in and then our one trillion dollar bailout where would you be right now you were so grateful that these guys step in because we were hemorrhaging and rockets are frozen and everybody knows you're a fish arizona no no no no i was never a great favor of any of this bailout what are you talking about i would have let them all go bankrupt in two thousand and eight in two thousand and nine it is outrageous what we're doing people who tried this such as the japanese have now
have lost two decades the japanese refused to let anybody fail they have zombie banks and zombie companies and twenty years later their stock market is down seventy five percent this approach doesn't work americans already had one last decade we're going to have two or three at the rate they're going. to want to jump in there one of the things i'd like to ask everyone here is that all these governments are going through austerity i mean including the if you tally and as we speak right now and what can the austerity create growth guineas can you can we do you agree with that because i can't think of too many examples where i was here it is because if you want to pay back these loans you're not generating enough wealth i mean again it's a damned if you do damned if you don't approach inside the eurozone. austerity doesn't create growth governments don't create growth low taxes getting government out of the way letting markets work that creates growth my favorite example of this is what happened in new zealand in the early one nine hundred eighty s.
when they turned their back on everything that the i.m.f. had said they cut taxes across the board they did what they could to strengthen the new zealand dollar and the next thing you knew you're running budget surpluses you have a trade surpluses they went there for the proper way of allowing the market to freely function if we would do that we would do with many of these problems simply subside . i don't go away so austerity i'm afraid that's not the problem is not the problem it's a government is the problem getting in the way putting too many blocks in the way of people doing the things that in their own best interests serve everybody else ok well you think about that germany's austerity listen why did you go ahead and write in the early and the early in the early one nine hundred ninety s. scandinavia had the same problem huge problems and in scandinavia a lot of people went bankrupt they reorganize they had a hard or two or three years with since then scandinavia has been one of the great growth region so the country sweden is probably better off than most nations you know as we speak in two thousand and one south korea had the problem of the end of
the ninety's people went bankrupt they had horrible pain but since then they've had a booming economy the list goes on and on people who've taken the pain accepted reality done something about it and then started over this idea of doing what the japanese did doesn't work doing what the americans have done doesn't work ok shares i don't think everyone's talking about a selective default i mean is that just double speak for when it comes to a country like greece i mean i just don't want to call it default is this selective i mean is because it's not built into the euro zone you can't have it happen early so are they just trying to kind of fake it in say it's a default but it's not a default. you know we're very close to the line the bottom line is if the restructure will happen and it's going to happen you can call it a default if a restructuring actually does happen the credit agencies have a different view on this they believe that private participants are involved they will consider it
a default when you just step back for one second you know austerity needs to happen in a lot of these countries obviously too much austerity will stifle growth has got to be some balance here some some mechanism to grow down the road or there's no hope you know unfortunately both examples jim and dennis are giving are in the past in the eighty's in the ninety's when two thousand and eleven the financial markets have mutated we are in a very different environment right now we have a crisis of fear and fear has no economic logic to it and once it spreads its present while foreign everybody looks like greece portugal ireland spain if you need now and the consequences are quite devastating we destroyed the american middle class wealth already there is another generation here and. break. records are pretty good your discussion of yours is. if you.
we'll. bring you the latest in science and technology from the realms. we've got the future covered. they faced this is not a problem but the warning. should say everybody should support the tree strikes they have no idea about the hardships that face. plate one is this is all going to need some. for the army to license to use is the most precious thing in the world. of self-sacrifice and heroism but those who understand it
ok jim and i to go to you is this is the is it too expensive to lead for your old guy or is it too expensive to keep it going. well first of all i should tell you i own the euro for a variety of reasons but we'll come back to come back to that that in a minute i want to go to share point. for hundreds of years hundreds of years we've had bear markets and when you have a long period of exist somebody has to clean out that exist you cannot just keep going and going and going and going and pouring money down a rat hole the world doesn't work that way and nothing wrong with a bear market their markets have been going on for hundreds of years they clean out the excesses and this is the and you start over it's usually it's like a forest fire when you have a forest fire it's terrible but it cleans up the underbrush it cleans out the deadwood and then the forest can grow even better the same way with recessions depression well depressions and and even a bear market ok but it sure is arbitrary the analogy of the fall of the forest
fire is nice but we're talking about people and governments and elected officials and this is where it gets really really sticky doesn't it ok absolutely are you going to have more heat i don't want to pay for and i'm very happy with my situation right now ok sure. the bottom line is you know a crisis is different than a bear market and in a crisis you know it's like a victim that has just been hit by a bus and is hemorrhaging to a major artery on the road what you want to do is stem the hemorrhaging and then decide you know then taken to hospital and then decide what you want to do but you've got to stem the hemorrhaging because in that hemorrhaging you lose your middle class if you lose your middle class you have decades and decades of pain ok did you see i could see you want to jump in there go ahead. yeah i did want to jump in shares i brought up the idea that jim and i supported what happened in the united states and that's just not true and jim and i may argue about one thing i think that what the united states government did and in october of two thousand and eight when when the financial system really was about to seize up the central bank
acted as central banks are supposed to do through history supply reserves in excess in order to accommodate that circumstance and get you past that two or three week or two month period of time what we've done since then however by continuously allowing the central bank to expand its balance sheet and supporting that expansion of those monetary reserves i take issue with that i think we needed to have stopped quite some time ago we did the right thing in in october two thousand and eight applying liquidity in the system but continuously doing it and supporting industries that probably shouldn't be supported by supporting businesses that probably should have been supported gets in the way of progress gets in the way of all allowing those businesses that really need that new capital that will be created to move forward so i take exception we need to do the right thing at a that a period of time of panic but panic has ended panic is done now you need to tell the greeks greeks steady i think you're being paid the taxes he is actually just
beginning and it's coming back with a fury right now shares and if i can ask you a question well no if we look at what's going on with italy and then we can look at spain and then it gets worse and worse and worse and it is perceptions it's a very important chairs and if i can ask you this monetary union it's monetary there's no fiscal side to it is that what's needs to be done to fix this because i think i'll maybe all of us would agree that you just can't keep pouring money into a system that isn't structurally change it's not fixing the problem you're just dealing with the moment of them of the moment and it's called fear. that's right and i think that what you've got you hit it on the head right here it's about perception the problem has been that the european leadership has been so bad they have mangled the process for the last eighteen months clear decisive action would have calm the markets a long time ago and we wouldn't be talking about second bailouts in ireland or in portugal and talking about a financial crisis hitting italy at this point so the problem is there's no clear decisive action a lot of domestic politics going on and when you have
a union like this you can't behave like this it's that simple oh you invite disaster to your shores now you're right this is not a fiscal union but they are fiscal constraints when you join this union and i think that they're now coming aware that the fiscal part of this is more critical than the market part at this point ok jim you want to look like you're here is our. jim go first i want to ask peter as sure as i want to ask peter i'm sure other who's going to pay for all of this who's going to pay you know america's the largest debtor nation in the history of the world right now who's going to pay for europe to be bailed out all of the west who's going to pay for all of this are you sure it's are you peter the germans the germans you can see germans and they're getting . all the time so that brings up a very interesting point and look i mean at one point the germans are going to say enough is enough and i think everyone would feel that's justified in the danger we have here. what are you sure it was you know no one is going to.
yeah it sure is a when you say decisive action what sort of decisive action should have been undertaken decisive action on the part of government always frightens me what sort of decisive action would you have said would have been proper. had it's a clear message that clear message to the market that a fund has been created the bailout will happen the restructuring will happen everybody's aware they cannot pay the money back instead of saying you know what one year from now they're going to go back in the private markets that was not going to happen even today the european central bank is not talking about restructuring they don't want private investors involved in this plan and the bottom line is everyone knows it has to go that way so they delay the confusion the different talking heads are not helping the situation and creating more confusion in the market when the market gets confused it starts to panic when you think about that jim is it shares are everyone was going jam. every one of
italy greece portugal spain or belgium arlan all of their debts are going up over the next few years none of those countries have declining beds or clothing deficit this is just getting worse it's not getting better there and five years from now we're going to look at each other and say my god now the world is coming to an end because the debts are too staggering for anybody to deal with issues one of the biggest problems that one of the biggest criticisms of the of the eurozone is that it doesn't really promote a lot of fiscal responsibility because you can there's moral hazard out there or you could just you know just wait for the for the lifeboat to be you know to rescue you because you don't have to be responsible i mean is this something that needs to be changed where people are made it held accountable because like you said when the middle class is gone who's going to be paying taxes. look you're absolutely right you know they they believe that peer pressure and public pressure could keep these countries in line but it didn't work and i go on and this is presumptuous that we
thought it would work and if this market failure the markets believed it would work and you know what possessed the markets to believe that the greek risk would be the same as german risk so it was market failure clearly now there are calls for for example the european central bank is calling for a european finance minister and the purpose of this finance minister is really not to represent all of the eurozone countries but basically watch over the bailed out countries so it would be like a mini i.m.f. within the euro zone for conditions attached to countries that are bailed out and that's coming there's no question ok jim how much that's what role should i mean to do one of the things that germans are saying if there are more bailouts we're looking at greece particularly there must be a private sector has to get involved in this the i.m.f. is agreeing with that but there's not a lot of other there's not a lot of consensus across the eurozone on the how much should a private sector be involved in building up these governments i happen to agree with the private or private sector made the mistakes the private sectors made the
loans to the greece made the lowest all these people take your losses i mean you made the mistakes for taxpayers in finland and austria didn't make the mistakes why should they have to pay for all of this i mean this is really this is terrible economics and it's horrible morality and i think politicians care about morality that's for sure but if you think about that how much of the private so maybe all of this i made a bad. well i made a bad trade yesterday in crude oil shares i would you help bail me out please oh no i think i'll go to the germans and ask them to bail you know i don't have a legal is the same it's the same idea you and i had a legal agreement and united married that i didn't hear us on that we're not sure is are you bring up an interesting way to do this this is a very different kind of leader address of the euro zone is ok i'll go ahead jim go ahead hold on that's exactly what i meant hold on guys there is a link there was a legal agreement with the european union is called a master treaty you were supposed to keep your debts with your deficits under three
percent you were supposed to run a sound too rich a contract a sound economy these guys violated a law they violated the treaty and now you expect me to bail them out of pleading go are you going to look they are you going to bail me out of here i have a right it jersey but bottom line is you're absolutely right they're violated there's no question they violated the cheated on the books they did all sorts of things that were not kosher but here's the catch a legal contract was signed between the seventeen countries and now it's a catholic marriage they can get out of things ok it's interesting i mean for a minute wait you know jim let me ask you a question here i mean again you know we focus on these national economies ok but really it's go back to really work it's the banks that want these bailouts they want they want governments to bail out these countries so they can pay the banks money that owe them so it's really not about people is it it's about making sure banks get their money back private individuals in many cases. peter maybe i haven't
made sense clear i would make the banks take their losses i would make them suffer they are the ones who made the mistakes that made you jim and that's a good trait there was a consistent wall street was bailed out because everyone we were all told that we need a banking system so that we're doing the same thing go play now we hear the banking system that's the rationale i'm not saying i agree with it. you said the operative words we were told yes you know who told us that the banks and banks who are panicking they called up and said save me save me save me come on let them i want to repeat banks have been going bankrupt for hundreds of years it's not the end of the world it may be a depression but you know if we let more people go bankrupt in one thousand and two thousand and eight we probably have it behind us by now other countries have it's been three years we would have had a horrible three years perhaps but you know and i in two thousand and eight out there and oklahoma and texas they were doing fine it was only on wall street that
you had these staggering problems ok shares i'm going to give you the last word what's the future of the euro five years from now five years from now i think that had a two tier euro zone and there has been the have nots ok dennis what do you think should be would you would you like to see the round in five years. i think it will disappear in five years i think shares out his right i think will be a northern fiscally responsible euro and i think in the southern states that have proven themselves to be fiscally irresponsible they will all go their own way and we'll be back in the eschewed oh we're back to the drachma we'll be back to the era of the right let's see what the future holds for the euro many thanks and i guess sitting in virginia washington and in singapore and thanks to our viewers for watching us here r.t. see you next time and remember of cross talk meals. take a candy. store.